8/11/2014 – An up day with the Dow Jones up 16 points (+0.10%) and the Nasdaq up +30 points (+0.70%).
The stock market continues to, more or less, behave as anticipated. So much so, that my subscribers know not only where this correction will bottom (hint….its not yet in), but also the exact date. Plus, what to expect from the resulting rally. Click here to learn more.
It has been a while since we have talked about how overvalued the stock market is from the fundamental perspective alone. This article should get us going “Everything seems expensive”: Why today’s valuations are worse than in 1999
- Median P/E today is 20 vs. 16 in January 2000
- Median price-to-book today is 2.5 vs. 2.2 in 2000
- Median price-to-revenue today is 1.8 vs. 1.4 in 2000
Yet, most of the analysts discussing the subject matter miss the big picture. Not only are today’s valuation levels just a little bit higher, they are exponentially higher. This has to do with the fact that a lot of the earnings growth over the last few years have been driven by money printing, QE, low interest rates, etc….
If fact, if we are to account for such factors, today’s artificial P/E ratio is likely to be well over 40. When today’s earnings disappear, as they will in the upcoming recession, you will see the E in the P/E vanish and the ratio jump much higher. That is exactly what happened in 2008 when earnings vanished and the S&P P/E jumped from 18 to over 60. This will happen again as the next bear leg develops.
This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2014-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years. If you would be interested in learning when the bear market of 2014-2017 will start (to the day) and its internal composition, please CLICK HERE
(***Please Note: Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. August 8th, 2014 InvestWithAlex.com
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Is Today’s Market More Overvalued Than It Was At 2000 and 2007 Tops? Google